|Dear Center Members:
|This GAQC Alert provides information on the following:
- A status update on the expected addendum to the Office of Management and Budget (OMB) 2020 Compliance Supplement (Supplement addendum) and a related GAQC comment letter;
- A summary of topics discussed at a recent Single Audit Roundtable meeting, including significant concerns on the new Provider Relief Fund program;
- Updated illustrative audit reports are now available on the GAQC Web site, as well as a marked report to show changes needed for the 2018 edition of Government Auditing Standards (Yellow Book);
- Notification that the no-CPE archive of the GAQC Web event, Preparing for your First Single Audit: An Auditee Perspective, held on September 14, 2020, is now available; and
- A hold the date reminder for upcoming GAQC Web events.
The GAQC was provided draft sections of the Supplement addendum for comment just over a week ago with a one-week review period. Thanks to our GAQC Executive Committee members for assisting with this intensive process. The review comprised a total of 14 programs (some new and some existing), including drafts of the Coronavirus Relief Fund (CRF), the Provider Relief Fund (PRF), and the Education Stabilization Fund. We are not able to share the drafts of programs reviewed.
The comments we submitted on each program were substantial. As a result, we developed a comment letter containing overarching comments and concerns that accompanied our detailed comments. We encourage members to review the letter. Our major concerns include significant issues with the PRF program (see next section for more on this program); a lack of guidance on donated personal protective equipment; and an overall approach taken that shifts the onus of understanding and implementing requirements for new COVID-19-related programs and compliance requirement changes for existing programs to recipients and auditors without proper direction from the relevant federal agencies. Further we strongly encourage OMB to consider reestablishing audit submission deadline extensions for year-ends through June 30, 2020, and will be continuing to advocate for this. OMB has not provided an estimated issuance date for the Supplement addendum, but we believe it will be late October to mid-November at the earliest.
Other Single Audit News
The GAQC staff and Executive Committee members hold a biannual a Single Audit Roundtable (SART) meeting with key single audit stakeholders (both federal and state) to discuss matters of mutual interest. After missing the spring meeting due to the pandemic, we held a remote SART earlier this week. In addition to discussing the Supplement addendum (see above section), several other items of interest were discussed:
PRF Program. Our significant concerns on this program primarily center on confusion around the concept of lost revenue which is subject to recipient reporting on the Schedule of Expenditures of Federal Awards (SEFA), and the fact that the draft Supplement addendum section for this program was silent on this concept. On September 19, 2020, the U.S. Department of Health and Human Services (HHS) issued reporting guidance to clarify, among other things, how lost revenue is to be reported to HHS. This guidance is directly contradictory to Frequently Asked Questions that HHS previously issued on this topic. Stated simply, the new HHS guidance bases the calculation of lost revenue on a year-over-year calendar year change in net operating income. This results in a much narrower definition of lost revenue that has implications for both accounting purposes and for what recipients include on their SEFAs. Numerous questions have been raised on the new HHS guidance. Our message provided at the SART is that clarity on this topic is critical for auditors to be able to verify whether recipients have appropriately calculated total PRF expenditures/lost revenue subject to audit; for determining whether the threshold for a single audit has been met by a recipient; and for determining the type A/B thresholds and the array of major programs to be audited. HHS staff stated they were working to develop clarifying guidance on the recent reporting guidance and would also work to revise the draft PRF Supplement addendum section to provide more definitive guidance on lost revenue. If you have healthcare clients that have received these funds, you should closely follow developments relating to this program. Watch also for further GAQC Alert updates.
Profession Concerns. The GAQC Executive Committee chair briefed the group on profession concerns including challenges with: (1) determining what goes on the SEFA; (2) determining when an award or subaward exists; (3) the timing and content of the Supplement addendum; (4) identifying requirements for new programs and requirement changes for existing programs; and (5) being able to complete single audits within the deadlines prescribed in the Uniform Guidance.
New Uniform Guidance. As noted in GAQC Alert #412, OMB recently issued an update to the Uniform Guidance titled, Guidance for Grants and Agreements. The revisions are generally effective on November 12, 2020, for new awards issued on or after the effective date, although 2 sections are effective immediately (those relate to termination of federal awards and new prohibitions on certain telecommunication and video surveillance services or equipment). OMB staff explained that they are working on updating existing Uniform Guidance Frequently Asked Questions to address implementation of the regulation and will also be issuing new questions and answers to address other common inquiries. Watch for further GAQC Alert updates.
2021 Compliance Supplement. OMB reported that the agencies are already working on development of the 2021 Compliance Supplement and hope to issue it earlier than the past two years. Part 3 will need more updates than usual to address the recent Uniform Guidance.
Updated Audit Reports Posted
The AICPA 2020 Audit Guides, Government Auditing Standards and Single Audits (GAS-SA Guide), and State and Local Governments (SLG Guide) contain updates to various illustrative auditors reports as follows (see GAQC Alert #415 for more information about these Guides):
The GAQC has posted a sampling of the above illustrative audit reports to its Illustrative Auditor's Reports Web page. Additionally, that posting also includes a red-lined version of a Yellow Book report illustration to help you easily identify what has changed in the report text.
- Yellow Book report illustrations - slight updates to the report text to reflect changes needed for the 2018 edition of Government Auditing Standards;
- Single audit report illustrations - no changes to the report text, although updates made to certain informative footnotes to the reports; and
- State and local government financial statement audit report illustrations - no changes to the report text, although updates made to certain informative footnotes to the reports.
Finally, the illustrations posted by GAQC and those in the 2020 Guides mentioned above do not reflect the AICPA Auditing Standards Board new reporting standards due to a delay in their effective date to audits of financial statements for periods ending on or after December 31, 2021. However, because early implementation is permitted, the GAQC is currently developing updated report illustrations that will reflect the new reporting requirements that we hope to post on the GAQC Web site before the end of the calendar year. The full array of updated illustrations will be included in the 2021 edition of the GAS-SA Guide and the SLG Guide.
With the significant influx of federal funding due to the COVID-19 pandemic, there will likely be many entities that have never had to undergo a single audit before. If you have state, local government, or not-for-profit clients or potential clients in this situation, please inform them that the GAQC has posted the no-CPE archive of its Web event, Preparing for your First Single Audit: An Auditee Perspective.
Hold the Date for Upcoming GAQC Events
We currently plan to hold two important Web events in November. The planned timing and summary of each event is included below. If you are interested in these events, we ask you to tentatively hold the dates on your calendars from 1:00 PM - 3:00 PM (Eastern Time). However, due to the uncertainty around the timing of the issuance of the Supplement addendum and resolution of issues surrounding the PRF program, we may need to push the dates further out. Watch future GAQC Alerts for updates.
November 11, 2020, An Audit Primer for Auditors of For-Profit Entities Receiving HHS Provider Relief Funds - Many for-profit entities will be subject to HHS audit requirements for the first time. This event will provide auditors with information and best practices about these engagements.
November 17, 2020, Supplement Addendum and COVID-19 Implications -This event will be a follow-on to previous GAQC events and will cover OMB's Supplement addendum, as well as the latest COVID-19 implications.
* * * * *
AICPA Governmental Audit Quality Center